Broker notes on Bowleven’s Interim / resource upgrade

Two broker notes this am on Bowleven’s interimsand resource upgrade…

Barclays Capital

Stock Rating/Sector View: 1-Overweight/1-Positive
Price Target: GBP 2.15 (from GBP 2.05)
Price (23-Mar-2012): GBP 0.88
Potential Upside/Downside: +144%
Tickers: BLVN LN / BLVN.L

With its interim results for the six months to 31st Dec-11, in our view, the company provided a positive update on its Miocene Deep Omicron fairway offshore Cameroon. Following the integration of the Sapele-3 well data, Bowleven increased its oil-in-place estimate on Deep Omicron to 615MMbl from 171MMbl. As a result, we are increasing our PT by 5% to 215p, as we believe this could improve the economics, making its resource base more liquid-rich. However, we also believe a degree of uncertainty still remains on the well productivity of a typical development well on the Deep Omicron complex. An extended well test, which could be part of the upcoming appraisal campaign, may provide valuable information on lateral connectivity of its sands. This will ultimately dictate their reserves potential. Next catalyst for the company is the signing of an MoU with Ferrostaal, which could lead to the construction of a fertilizer plant and would allow the company to unlock its oil resources. With more than 140% upside to our PT, we reiterate our 1-OW.

Funded for at least two wells: As of 31st Dec-11, the company had $124mn of cash in hand. We believe this is sufficient to drill between 2 and 4 wells in the Etinde permit, depending on location and target depth, once the programme is finalized, and whether Vitol participates in future appraisal drilling in Block 5. Vitol also declined to exercise its option to acquire an additional 10% interest in Block 7, which includes IE, IF and IM.

Deep Omicron, bigger volumes: Following the results of the Sapele-3 well, Bowleven increased its P50 STOIIP oil estimate on Deep Omicron to 615MMbl from 171MMbl and its gas estimate to 1.5Tcf from 426Bcf. We believe this could make the fluid-stream of its hub-and-spoke development in Cameroon more liquid-rich. We therefore increase our Chance of Success on our mid-case to 65% from 50%, which assumes an oil-to-gas ratio of 250bl/MMScf, increasing our NAV by 10p to 215p.

Next catalysts: We believe that the MoU with Ferrostaal could be signed within weeks. A potential farm-out on the onshore Bomono block could also be announced during Q2/Q3 12. The first drilling newsflow is likely in Q3 12 with the results of the IM-5, which could be followed by a second appraisal well in Block 7 by Q4 12 or Q1 13.

and Fox Davies note as follows

Fox Davies Broker note

FoxDavies Daily Monitor – BowLeven
Monday, March 26, 2012

BowLeven (BUY, 250p) (BLVN,  up 12.75%): A Butterfly Emerges? – The results mark the close of a year of transition for BowLeven migrates towards development of its discoveries. Sapele’s volumes continue to improve, and while the all-important commerciality is yet to be declared the outlook remains buoyant. With the final development scenario for Etinde underway and a full work 2012 programme fully funded, investors are well set for a year of intense activity. Following these results we reinstate our BUY recommendation with a 250p price target. In this news:

Sapele-2 and Sapele-3 exploration wells encountered significant hydrocarbon intervals at multiple levels, our fourth and fifth successful wells in the Douala Basin.

Sapele-2 tested high quality light oil from Deep Omicron interval with a peak flow rate of 2,738 boepd.

Sapele-3 further extended the Deep Omicron and Epsilon fairways, with oil encountered in both intervals, 16 kilometres from the original Sapele-1 discovery well.

Substantial upgrade of Sapele Deep Omicron in place hydrocarbon volumes following Sapele-3 well results. Deep Omicron P50 STOIIP and Associated GIIP now estimated as 615 mmbbls and 1.5 tcf respectively. Resource revision on-going.
Significant progress made towards finalising the Etinde development concept, with the preferred approach based on a hub and spoke development.

• Jack-up rig contracted for two firm plus two optional wells on Etinde
• 2D seismic data set on the onshore Bomono Permit acquired in 2011 now fully integrated into existing dataset and first exploration well location identified.
• 4C OBC 3D seismic acquired over parts of block MLHP-7. Interpretation to support appraisal/development activities now ongoing.
• Group cash balance $124 million at 31 December 2011, no debt.
• Fully funded for current exploration and appraisal programme on Etinde and Bomono.
• Bomono farm-out discussions ongoing.
• EOV disposal nearing completion.